S&P offers hopeful signs to Wabash Valley

September 06, 2011

At about the same time Standard & Poor’s was taking Congress to task and lowering the nation’s debt rating, the agency sent positive signs about Wabash Valley Power’s finances.

“Standard & Poor’s told us that they’re going to keep us at an A- credit rating, and will leave their outlook as stable,” reported Chief Financial Officer Jeff Conrad. “They see our strengths as the fact that we have all-requirements contracts extending up to 2050 with most of our members, that our member co-ops have a diverse customer profile, with about 60 percent of their revenues coming from residential customers, and that we have sufficient resources to meet our members’ power needs.”

Even better was S&P’s suggestion that Wabash Valley’s credit rating could improve in the near future. “They said that if we sustain our fixed charge coverages and attain the targets in the equity plan the board approved, they might consider an even higher rating,” Jeff added. “That’s a good thing to keep in mind as we approach budget season and future strategic planning efforts.”

The agency also identified what it calls “offsetting” factors, Jeff noted. “They said we have a history of undercollections, but we’ve actually overcollected during the last two years. Over time, I think their analysis will begin to reflect that change. They also pointed to what they consider high debt leverage, but that’s something we’re already addressing through the equity plan. We’ll be at about 20 percent in 2012, which should speak to their concerns.”

The advantage of having a healthy credit rating is that it makes credit more easily available to Wabash Valley, and allows the G&T to borrow at better interest rates. “We conduct an annual update with S&P, so we’ll sit down with them again next year,” said Jeff.